Global Interactive Technologies, Inc.: Form 10-Q for the period ended Mar 31, 2025

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included on in our Annual Report on Form 10-K for the year ending December 31, 2024. As discussed in the section titled “Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified those discussed in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ending December 31, 2024.

Overview

Global Interactive Technologies, Inc. (together with its subsidiaries, collectively, the “Company”, “we”, “us”, or “our”), a Delaware corporation formerly known as Hanryu Holdings, Inc., is a technology-driven platform company connecting global fans of Korean culture through innovative digital experiences. The Company operates Faning, a comprehensive interactive platform designed to facilitate content discovery, monetization, user-generated content, and deep community engagement among global fandom communities. The Company focuses on leveraging technology to expand Korean culture (Hallyu) beyond traditional K-Pop, spanning digital media, entertainment, and interactive platform services.

The Company is a corporation that was incorporated in the state of Delaware on October 20, 2021, as Hanryu Holdings, Inc. On December 5, 2024, the Company formally changed its name from Hanryu Holdings, Inc. to Global Interactive Technologies, Inc. pursuant to an amendment to its Certificate of Incorporation filed with the Secretary of State of Delaware. In connection with the name change, the Company also changed its Nasdaq ticker symbol from HRYU to GITS.

Corporate Structure and Subsidiaries

As of March 31, 2025, the Company’s primary operating subsidiary is Faning Korea, LLC, a wholly-owned subsidiary based in Seoul, Republic of Korea (“Faning Korea”). Faning Korea oversees the development, maintenance, and operation of the Faning application and related web services.

Throughout 2024, the Company restructured its subsidiaries, including the divestiture of Hanryu Bank on December 28, 2024, and FNS and Marine Island on November 5, 2024. Faning Korea was acquired on December 4, 2024.

Our Business Model and Growth Strategies

FANING has become a globally recognized platform for providing an amazing and active community among people that have an interest in K-POP and modern Korean culture. The multifaceted nature of the Company’s operations has solidified the business’ reputation as one of the preeminent platforms for fandom. FANING’s users are able to seamlessly interact with each other to discuss exciting K-POP topics.

FANING allows fans to interact within their fandoms and discuss these interests, create and share content, and interact through a number of channels, including (i) secure, direct messaging, (ii) open social pages, and (iii) virtual spaces (“FANING Clubs” or “Clubs”). FANING Clubs concentrate on a specific topic, allowing moderators to control the Club functions, and the Club members to aggregate their FP rewards. Integrated within each FANING Club is a “Club Vault,” a service provided by FANING that allows the individual members of a Club to donate their personal FP to an account held by the Club. The Club Vault allows the Club’s members to aggregate their FP and increase their purchasing power. This increase in purchasing power allows the Club’s individual users to more rapidly accumulate FP and pool their rewards with other users, in order to purchase services such as fan events or the ability to live stream a concert from their favorite band. Decisions regarding the use of the accumulated FP within the Club Vault are determined by a vote of the Club members.

Our users are the core of our business. We provide our users with customized experiences, including unique interactions within the FANING community. FANING algorithms curate individual user experiences, recommending content, clubs to join, users to connect with, and enabling users to subscribe to keywords and access automatic content geared toward their interests. Through these services, FANING provides the fandom community a way to stay connected and up to date with their fandom communities.

FANING further offers each user the ability to freely create, upload, and monetize their own content by earning in-platform rewards of FP. FANING removes language barriers, providing live chat ability between users worldwide, and global access to platform content, as the FANING platform supports automatic, real-time translation services for 17 languages. FANING also offers a fast, secure, and easy-to-use commerce and user-to-user transaction system. These unique features will allow FANING to generate user loyalty, maintain user interest in the platform, and attract new users.

For growth, we intend to develop short content (two minutes) that will focus on interesting pop music and cultural topics. These videos will be distributed through FANING while concurrently being shown on third party social media platforms and video sharing websites. This new aspect of growth is important for a few reasons. First, it will further enhance the strength of the FANING community by fostering a greater degree of engagement. Second, it will allow for greater visibility for K-POP on a global basis. Management will continue to expand this aspect of operations through the life of the business.

Components of Results of Operations

Revenue

We anticipate that our primary source of revenue will be generated from FANING platform operations.

To diversify the revenue streams within our primary income source, the FANING platform, we carried out updates over several months. As a result, the newly revamped FANING platform was launched in April 2025. Accordingly, we expect revenue to begin generating from May 2025. In addition, we anticipate that revenue from goods and K-Food products will also begin to be generated in the first half of the year.

We expect that our primary sources of revenue on the FANING platform will be derived from (i) direct sales and (ii) commissions from user-to-user sales. We started generating revenue from FANING platform.

(i) Direct Sales We started generating direct sales revenue through: (i) original content sales, such as FANING produced web series that can be purchased by users on our platform or licensed to distributors; (ii) e-commerce goods through FANING’s Fanshop, which sells items such as the latest fandom goods and upcoming concert tickets; and (iii) advertising sales, including banner placements, splash advertising, pop-up advertisements within the platform, in-platform promotions, and branded content productions. For advertising sales, we act as an agent in arranging third-party promotions to our users. Our business model provides for the distribution of a percentage of our advertising revenue to FANING users in the form of FP as incentives for certain activities within the FANING platform. Users can then spend FP within the FANING platform to purchase goods and/or services, either directly from us or from other users.

(ii) User-to-User Commissions We intend to generate commissions on user-to-user transactions when FANING users sell their own products, content, and services to other users. Users can sell: (i) items they have created or produced such as emojis, online stickers, web novels, and webtoons; and (ii) tangible goods or other non-FANING platform based fandom items, such as concert tickets. For each sale by a user of content and non-tangible goods, we intend to collect a percentage of the gross purchase price. For sales of tangible goods and non-FANING platform based fandom goods, transactions are processed through a secure escrow account, for which we will receive a commission based upon the aggregate purchase price of the transaction.

Revenue from retail sales is generated through services offering a wide variety of products for purchase. Although we have generated limited revenue from such services in the past, we expect to earn more steady revenue from this business model starting in May 2025.

Revenue from marketing services is generated by other subsidiaries of the Company, such as Faning Korea, and includes various activities such as creating and distributing flyers, hosting events and giveaways, producing advertisement videos, and more. Although we have generated limited revenue from such services in the past, we expect to earn more steady revenue from this business model starting in May 2025.

Revenue from news agency content sales is generated by providing news articles and original content to other third-party media outlets. Although we have generated a de minimis amount of revenue from such services in the past, we expect to earn more steady revenue from this business model starting in May 2025.

As we continue to diversify our product and service offerings, we anticipate additional revenue streams, including Our entertainment agency business supports influencers in expanding their influence both inside and outside the FANING platform. As each influencer’s influence grows, we expect to monetize their status through advertising agreements or performance-based contracts. We anticipate generating revenue from this business model starting in May 2025.

We expect to begin generating revenue from our entertainment agency business starting in May 2025. However, there can be no assurance that we will be able to successfully launch such affiliated businesses, or that they will be successful even if launched.

Cost of Revenue

Cost of revenue consists primarily of service costs, hosting costs, and production costs such as advertising costs, down payments, and royalty payments to artists under entertainment contracts for original FANING platform content, such as web series and concerts. We expect that cost of revenue will increase proportionately with the growth of the user base for the FANING platform.

Sales, Marketing and Advertising Expense

Sales and marketing expense consists of compensation and commission costs of the sales and related support teams, as well as travel, trade show, and other marketing related costs. Advertising costs are expensed to operations when incurred. Expense also includes the cost of creating and implementing marketing strategies, conducting market research, and producing advertisements. Those expenses are recognized as incurred based on the accrual basis of accounting. We expect that sales, advertising, and marketing expense will increase on a proportionate basis with user-growth, and will vary from period-to-period as a percentage of revenue for the foreseeable future. This variation is due to our plans to continue to invest in marketing in order to grow both sales and our user-base by way of increasing brand awareness. The trend and timing of our marketing costs will depend in part on the timing of marketing campaigns.

Research and Development Expense

Research and development expense includes costs to maintain and develop the FANING platform. Costs incurred for research and product development are expensed as incurred and include salaries, taxes and benefits, contracting, and travel expense related to research and development.

General and Administrative Expense

General and administrative expense consists primarily of personnel-related costs, including salaries and benefits, non-cash stock compensation expense, equipment expense, office and facilities costs, legal, accounting and other professional fees, public relations costs and other corporate and administrative costs.

Results of Operations

Three months Ended March 31, 2025 Compared to three months ended March 31, 2024

The following table sets forth a summary of our statements of operations for the three months ended March 31,2025 and 2024:

1. During the fiscal year 2024, the Company underwent a restructuring process, which included replacing the management team that had been operating the Company ineffectively and divesting financially distressed subsidiaries. As a result, no revenue was generated during the fiscal quarter ended March 31, 2025. In addition, revenue for the comparative period ended March 31, 2024, was reclassified as discontinued operations following the divestiture of subsidiaries in 2024, and therefore, no revenue was recognized from continuing operations.

2. The operating loss for the first quarter of 2025 was $563,468, representing a 45% decrease compared to an operating loss of $1,023,569 in the first quarter of 2024 (which included (i) a loss from continuing operations of $164,563 and (ii) a loss from discontinued operations of $858,946). The primary reason for this decrease was the workforce reduction and the sale of subsidiaries in 2024.

3. Starting in the second quarter of 2025, the Company expects to generate revenue from the newly updated FANING platform, which was relaunched in April 2025. Additionally, revenue is expected from the sales of goods and K-Food products, gradually improving profitability. The cost-saving effects of the 2024 restructuring are also expected to contribute to improved financial stability.

Liquidity and Going Concern

As of March 31, 2025, the Company had an accumulated deficit of $38,467,982 and a working capital deficiency of $(719,575). As of December 31, 2024, the accumulated deficit was $37,901,301 and the working capital deficiency was $(665,352). In addition, the Company incurred operating losses of $566,681 and $1,047,071 for the periods ended March 31, 2025 and March 31, 2024, respectively. These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern beyond the issuance date of these financial statements. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. These financial statements do not include any adjustments that might result from the Company’s potential inability to continue as a going concern, including potential effects on the recoverability and classification of assets or the amounts and classification of liabilities.

The Company carried out updates to diversify revenue streams within its primary income source, the FANING platform, over several months and launched the newly revamped FANING platform in April 2025. The revamped FANING platform has been restructured with a user-centric approach and is designed to focus on achieving profitability. In addition, through its subsidiary, Faning Korea, LLC, the Company plans to pursue K-Food products and entertainment business ventures. Furthermore, to secure additional working capital, the Company intends to proceed with a capital increase and borrowings. However, there can be no assurance as to the outcome of these plans or that future financing efforts will generate sufficient capital to sustain the Company’s operations.

Contractual Obligations

We have no contractual obligations as of March 31, 2025.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet financial guarantees or other off-balance sheet commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholder’s equity or that are not reflected in our financial statements included elsewhere in this prospectus. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in foreign currency and credit.

Foreign Currency Risk

We have accounts on our foreign subsidiaries’ ledgers, which are maintained in the respective subsidiary’s local currency and translated into USD for reporting of our condensed consolidated financial statements. As a result, we are exposed to fluctuations in the exchange rates of various currencies against the USD and other currencies, including KRW.

Transactional

We generate the majority of our revenue from customers within Korea. Typically, we aim to align costs with revenue denominated in the same currency, but we are not always able to do so. As a result of the geographic spread of our operations and due to our reliance on certain products and services priced in currencies other than KRW, our business, results of operations, and financial condition have been and will continue to be impacted by the volatility of the KRW against foreign currencies.

Translational

Our functional and reporting currency is the U.S. Dollar (USD). The local and functional currency of our subsidiary, Faning Korea, LLC, is the Korean Won (KRW). The subsidiary’s assets and liabilities are translated into USD at the exchange rate in effect at the end of the reporting period, and its revenues and expenses are translated using the average exchange rate in effect during the period. The assets and liabilities of the subsidiary are translated into USD at the exchange rate in effect at the end of each period, and revenues and expenses are translated using average rates that approximate those in effect during the respective period. As a result, the value of these items in the condensed consolidated financial statements related to non-USD-denominated operations is affected by changes in the value of the USD, even if their value has not changed in the original currency. For example, a stronger USD will reduce the reported operating results of non-USD-denominated operations, while a weaker USD will increase the reported operating results of non-USD-denominated operations.

At this time, we do not invest in derivatives or other financial instruments to hedge foreign currency risk. However, we may consider such hedging activities in the future. It is difficult to predict the impact that such hedging activities would have on our results of operations.

Credit Risk

Our cash and cash equivalents, deposits, and loans with banks and financial institutions are potentially subject to concentration of credit risk. We place cash and cash equivalents with financial institutions that management believes are of high credit quality. The degree of credit risk will vary based on many factors including the duration of the transaction and the contractual terms of the agreement. As appropriate, management evaluates and approves credit standards and oversees the credit risk management function related to investments.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, as well as related disclosures.

Significant accounting estimates and judgments include:

• Classification and presentation of discontinued operations resulting from the divestiture of subsidiaries.
• Assessment of going concern and the recoverability of assets and obligations.
• Allocation of shared operating expenses and liabilities between continuing and discontinued operations.
• Potential impairment of intangible assets related to platform development.

Management regularly reviews its estimates and assumptions, which are based on historical experience and other relevant factors, including the current economic environment. Actual results may differ materially from these estimates. Any material changes in assumptions could have a significant impact on our financial statements.

FANING is a fandom-centered platform designed to deliver an all-in-one ecosystem that enriches the fan experience through content, community, commerce, and creativity. The platform is available in 17 languages and supports real-time multilingual translation, enabling global fan engagement. Users can consume K-culture content, interact socially, and monetize creative work, including fan art, webtoons, and merchandise.

The platform’s monetization strategy includes:

• Direct revenue from advertising, digital content, and commerce
• Commissions on user-to-user transactions, including gifts, stickers, translation matching, and creator content

As of March 31, 2025, FANING had over 26.6 million registered users globally. The platform is positioned to capitalize on the global rise in K-Culture fandom, now exceeding 229 million fans in 119 countries.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This update enhances the transparency of income tax disclosures by requiring detailed information on the effective tax rate reconciliation and income taxes paid by jurisdiction. The amendments are effective for annual periods beginning after December 15, 2024, with early adoption permitted.

In March 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income (Subtopic 220-40): Expense Disaggregation Disclosures. This update requires entities to disclose more detailed information about the nature of the expenses within certain income statement captions (such as cost of sales, SG&A, etc.). The standard is effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025. Early adoption is permitted.

The Company is currently evaluating the impact of these new standards and does not expect them to have a material effect on its financial statements upon adoption.

Contingencies

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management, in consultation with its legal counsel as appropriate, assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company, in consultation with legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is probable, but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

Relaxed Ongoing Reporting Requirements

We an “emerging growth company” (as defined in the JOBS Act) under the reporting rules set forth under the Exchange Act. For so long as we remain an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not “emerging growth companies,” including but not limited to:

• not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;
• taking advantage of extensions of time to comply with certain new or revised financial accounting standards;
• being permitted to comply with reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and
• being exempt from the requirement to hold a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not “emerging growth companies,” and our stockholders could receive less information than they might expect to receive from more mature public companies.

We expect to take advantage of these reporting exemptions until we are no longer an emerging growth company. We would remain an “emerging growth company” for up to five years, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, we would cease to be an “emerging growth company” as of the following December 31.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act of 1934, as amended (the “Exchange Act”) and are not required to provide information under this item.

Evaluation of Disclosure Controls and Procedures

Our management has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under “Exchange Act”), as of March 31, 2025. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2025, our disclosure controls and procedures were ineffective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (a) is recorded, processed, summarized and reported within the time periods specified by Securities and Exchange Commission (“SEC”) rules and forms and (b) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding any required disclosure.

Management has identified control deficiencies regarding inadequate accounting resources, the lack of segregation of duties and the need for a stronger internal control environment. Our management believes that these material weaknesses are due to the small size of our accounting staff. The small size of our accounting outsourced staff may prevent adequate controls in the future due to the cost/benefit of such remediation.

To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of external legal and accounting professionals. As we grow, we expect to increase our number of employees, which will enable us to implement adequate segregation of duties within the internal control framework.

These control deficiencies could result in a misstatement of account balances that would result in a reasonable possibility that a material misstatement to our financial statements may not be prevented or detected on a timely basis. In light of this material weakness, we performed additional analyses and procedures in order to conclude that our financial statements for the quarter ended March 31, 2025, included in this Quarterly Report on Form 10-Q were fairly stated in accordance with GAAP. Accordingly, management believes that despite our material weaknesses, our financial statements for the quarter ended March 31, 2025, are fairly stated, in all material respects, in accordance with GAAP.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, we are not required to provide information required by this item.